Investment is the missing ingredient as Greece rebuilds economy

Bloomberg — While momentum in the Greek economy  is now building with green shoots sprouting in sectors ranging from manufacturing to retail, the key staple of investment is still missing.

That means that social costs remain high in a country where unemployment is still an eye-watering 21 percent even after declining for four years. To get that rate down below 20 percent, Greece will need investments to grow at average rate of 8 percent for the next few years, according to National Bank of Greece economist Nicholas Magginas.

Industrial production grew for an eleventh straight month in August and the purchasing mangers’ index for Greek manufacturing hit a nine-year high last month. Even the country’s battered consumers are helping out, with retail sales growing since the start of the year.

Yet public spats over a couple of high-profile investment projects have hampered Tsipras’s efforts to portray the improvements as the dawn of a sustainable economic growth model.

The government was rocked last month when Canada’s Eldorado Gold announced a suspension of mining operations in Greece over a permitting dispute. Its efforts to get a key privatization over the line — the redevelopment of the former Athens airport Hellinikon — has  been slowed by environmental concerns and deliberations over whether the site is archaeologically significant.

“Investment is the growth component most susceptible to uncertainty,” said Magginas. “There’s a lot of deferred investments from 2015 and 2016 in the pipeline that can give a rebound. The hard part is sustaining it.”